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Incentives for Exporters
Imtiaz Rastgar
CEO
Engineering Development Board
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The EDB has
already helped several engineering sector companies like yours to
expand their market by exports.
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In order to make
export sales a sizeable portion of your total sales, the following
actions are absolutely necessary:
1
Create an
export sales department in your company. Focus of this department should
be only on export sales.
2 Make a target to expand
your current sales to the point where the domestic market is only 25 %
of total sales.
3 Train yourself as owner
manager, as well as your export staff on export related subjects. CBI (www.cbi.nl
) is a good training resource.
As you go along, EDB
shall be arranging special training courses for engineering sector
exporters.
4 Organize your production
operations for
a)
On
time delivery
b)
Quality assurance techniques.
c)
Skills
for your work force.
d)
Continuous improvement.
e)
Eliminate wasted
1.
time
2.
energy
3.
space
5 Capacity Expansion; unless
you have production capacity, you will not be able to reap the full
benefits of export efforts. This will need bold
investments in your production machinery.
The EDB worked with
the State Bank of Pakistan on schemes to finance such capacity
expansion.
State Bank of Pakistan Credit Incentive Schemes
o
Short Term Financing
A.
Export Finance Scheme
(EFC)
o
Long Term Financing
B.
Long Term Financing-Export Oriented Projects. (LTF-EOP Scheme)
A.
Export Finance Scheme (EFS)
§
Short-term working capital facility for 180 days to increase the exports
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Scheme
operates in two parts. Part-1 is the Transaction Based,
while Part-II is Performance Based.
§
Transaction based facility
a)
Coverage to the extent of 100% of export order/LC/contract.
b)
Facility is available at both Pre & Post shipment stages to direct
exporters (DE)- Available for 180 days
c)
Facility available to Indirect exporters(IE) at Pre-shipment stage
only-: Available for 120 days
d)
Performance required against every transaction.
§
Performance Based.
a)
Facility is available to Direct Exporters only
b)
Exporters are allowed a revolving cash credit limit equivalent to
50% of their total value of goods exported in the previous year.
c)
Performance is determined on the basis of export of eligible items made
in previous year under both parts of EFS
d)
The
exporter can avail facility for the maximum period of 180 days.
Mark-up Rate under Export Finance Scheme
(EFS)
a)
Mark up rate under EFS is fixed on monthly basis.
b)
Current Mark up rate is 7.5% plus Spread of Banks, which is 1%.
B.
Long Term Financing-Export Oriented Projects. (LTF-EOP Scheme)
§
Scheme for Long Term Financing for the Export Oriented Projects
(LTF-EOP)”
would allow the eligible financial institutions to provide funding
facilities to the export oriented units, who meet the financing
criteria, on attractive terms and conditions for import of machinery,
plant, equipments and accessories (not manufactured locally).
§
Scheme
applicable for new as well as
existing units-BMR
§
Speak
to your Banker about this and if he does not respond, get him into
competiton with another bank for meeting your requirements.
§
Also
talk to National Bank of Pakistan’s Korea Branch and Frankfurt Branch
for long time usance LCs while purchasing machinery.
Interest Rate Incentive
§
Interest rate is determined annually, however, the borrower is required
to repay the loan at markup that was applicable at the time of
disbursement of loan i.e. borrower will repay the loan at a fixed rate
for the whole period of loan.
Mark
up Rates under LTF-EOP
a)
Rates
for Borrowers 6% up to 3 years
b)
Rates
for Borrowers 7% over 3 and up to 7-1/2 Years
§
A
Workshop was held on this subject in Lahore, in Sept, 2006. In case you
were not able to attend, you can see some details at
http://www.engineeringpakistan.com/EngPak1/creditScheme.php .
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Kindly
go over this page and start talking to your bank for providing you
finance under this scheme. Make an investment plan before you go to the
Bank with your
loan application.
§
Please
keep visiting the EDB website, as it is being constantly up-dated with
all kinds of tariff and non tariff info, which could be of help in
accelerating the pace of your growth.
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Tax
Incentives for Exporters:
o
Income Tax: 0.75 % of export proceeds is Final liability.
o
Export development Cess 0.25 %
o
Customs Duties: DTRE
o
Sales Tax: Zero rated
§
Exports Processing Zones
o
Karachi Export Processing Zones – Phase I is fully developed
while phase II is being developed on 100 acres of land
o
EPZ,s
at Risalpur ,Sialkot and Gujranwala are being developed under Joint
Venture arrangements.
o
Some exclusive project are also converted into EPZ are
Saindak EPZ,Duddan (DEPZ),Reko
Diq EPZ and Tuwairqi EPZ
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Government of Pakistan has provided following Incentives in
Export processing Zones in Pakistan :
o
Full
ownerships rights.
o
Full
Repatriation of capital and profits.
o
No
minimum or maximum limit for investment.
o
Duty
free imports of machinery, equipment and material.
o
No
sales tax on electricity and gas bills.
o
Obsolete/old machinery can be sold in domestic market of Pakistan after
payment of applicable duties and taxes.
o
Freedom from national import restrictions.
o
Foreign Exchange Control Regulations of Pakistan no applicable.
o
Defective goods/waste can be sold in domestic market after payment of
applicable duties, maximum upto 3% of total value of export.
o
Domestic market of Pakistan available on same conditions as for imports
from each countries.
o
Production oriented labour laws to be solely regulated by the authority.
o
Relief
from double taxation subject to bilateral agreement.
§
Facilities offered at Karachi EPZ are:
o
Facilitation Desk
o
Clearing / Forwarding Services
o
Water,
Electricity, gas, telephone at site by EPZA
o
Construction Byelaws
o
Issuance of VIP cards/car stickers to investors
o
Investors not required to file Income Tax returns to I.T Department
o
Generalized System of Preference Certificate
o
Authentication of Identity cards to Labour
o
Offshore Banking Units
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EDB
has adopted the role of a Business Support Organization (BSO)of
the country please approach us for your needs for technology and
specialized knowledge needs. Contact person at EDB: Mrs. Raazia Shakir
§
Over a
period of time EDB has also developed strong network with Senior Experts
Services of SES ,GTZ,PUM,JICA ,JETRO ,VMO and CBI for :
o
Technology up gradation
o
Capacity Enhancement
o
Production and marketing techniques
§
EDB
has developed linkages with Pakistani Commercial Consulates abroad
to :
o
Support to EDB in international trade fairs management and arranging
meetings with Chambers, Industrial Federations in respective countries.
o
Routing trade enquiries to EDB
o
Facilitating Business Matchmaking
o
Facilitating collaboration with international engineering organizations
/ industry associations-VMO
o
Exchange of information on useful trade fairs
o
EDB
sends IB to CC to keep them update about latest developments on the
industry front.
o
Impart
briefings on markets, potential engineering sectors of Pakistan and
business development opportunities in various fields of engineering
o
Arranging meetings with prominent industrialist with Pakistani counter
parts during international fairs.
§
EDB
has developed linkages with industrial associations /chambers to
determine the indigenous capabilities/ capacities and assess export
potential.
§
EDB
has also developed linkages with universities and initiated
efforts to :
o
Include business subjects in all technology courses which should
fulfill the requirements of industry
o
Include shop floor training in the engineering syllabus covering machine
shop practice, component production techniques and assembly technique
o
Allocate booths to engineering universities in Engineering exhibition to
showcase their research and facilities
§
EDB is
working closely with CBR for :
o
Revision of DTRE scheme to make it more engineering industry friendly
o
Tariff
Rationalization exercise initiated for the year 2007-08
o
CGO-10
up dated
o
SRO’s
implementation-Input- Out ratios, Determination of local manufacturing
status etc
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While
all efforts are being made by EDB to expose industry to global market ,indusry
must strengthen its capacity in following areas :
o
Export
pricing
o
International Technical regulations and standards
o
Major
Product certification
o
Web
based marketing and E-commerce technologised
o
Packaging and labeling skills
o
Market
research tools
o
Quality assurances methods
o
Up
coming Technologies in the industry
o
Culture Change for timely deliveries
If you are looking
for ideas, go to
www.applegate.co.uk or
www.kellysearch.co.uk
Export to become a
prosperous company. Become fit to survive.
However, survival is
not compulsory!
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